Market Update for May 22
The mixed performance and abnormal rally on the Nigerian Stock Exchange continued at the midweek with the benchmark All-Share index closing higher to consolidate five sessions of artificial bull run that have so far been driven by cross deals, and a seeming competition among the bourse’s trillion capitalisation stocks as they try to outdo each other in a battle for size.
Investdata believes that the ongoing partial uptrend in the market should be of serious concern to the regulators to avoid what may eventually turn out to be overt market manipulation under their watch. We note also that the relative improvement in market liquidity has been targeted at the newly listed MTN Nigeria and Dangote Cement that are struggling for dominance ahead of the latter’s price adjustment for N16 dividend on June 4. While MTNN may inadvertently be playing catch-up, Dangote Cement seems in no mood to give up its number one spot on the table of super stocks on the NSE.
If the entire market continues to decline and prices are looking southward, while the inflow of liquidity pushing the aforementioned stocks would not trickle down to other stocks, it does suggest, we also believe, that Nigeria’s entire equity market structure, including the indexes, should be reviewed. This is with a view to providing meaningful and clear market direction, given that the market cannot play its role in driving economic development and growth in such haphazard movement or uptrend.
The benchmark NSEASI opened trading sharply with 2.06% upside movement as MTN Nigeria gained N13.15 per share, which was sustained into the mid-morning and afternoon when Dangote Cement moved a gain of N2 to N18, extending the three-wave movement. In all of these, the index touched intraday high of 31,194.69 basis points, from its low of 30,218.14bps on a low traded volume, breaking out the 31,000 mark, closing the session higher at 31,145.15bps.
Midweek’s market technicals were mixed, as traded volume was lower than previous day’s, in the midst of negative market breadth and strong positive sentiment as revealed by Investdata’s daily sentiment report. Buy position stood at 95% and sell volume, 5% of the total daily transaction volume index of 1.00.
The momentum behind the day market performance was up but still weak, as shown by the Money Flow Index of 38.56points, from previous day’s 30.67bps, indicating that funds are entering the market as buying sentiment for MTN and Dangote Cement increases. We note with concern that these deals in both stocks are by only a few stockbroking firms.

Index and Market Cap
The benchmark NSEASI gained a significant 922.18bps, closing at 31,145.15bps, after opening at 30,218.14bps, representing 3.07% growth, just as market capitalization rose by N408.31bn, closing at N13.72tr, from its opening value of N13.31tr, which also represents 3.07% appreciation in value. The NSE index is currently trading above its 100-Day Moving Average while breaking out the upper Bollinger band that further signals imminent reversal, as RSI has entered overbought region reading 71.00.
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The upturn amidst the negative breath was driven by sentiment for medium and high cap stocks like MTN Nigeria, Dangote Cement, Conoil, Dangote Flour Cadbury, UACN and Viafoam, among others. This impacted positively on the Year-to-Date loss, reducing it to 0.91%, just as market capitalization gain soared to N2.01tr, or 17.01%, from the year’s opening level of N11.72tr.

Bearish Sector Indices
All the sectoral indices were largely bearish, except for the NSE Industrial goods that closed 4.50% higher on the strength of the gain by Dangote Cement, while the NSE Consumer goods and Banking led the decliners by 3.57% and 2.67% each. Market breadth remained negative as the number of decliners outweighed advancers in the ratio of 27:12.
Market activities were mixed as volume traded dropped by 15.21% to 294.57m shares, from the previous day’s 335.6m units, while value rose by 5.18% from the previous day N17.19bn to N17.47bn. Volume was driven by ICT and financial services stocks, like MTN, Zenith Bank, UBA, Access Bank and Guaranty Trust Bank.
The best-performing stocks for the session were MTN Nigeria and Vitafoam that topped the advancers’ table, gaining 9.98% and 9.82% respectively, closing at N144.85 and N4.25per share on market sentiment and expectation of Q3 numbers. On the flip side, Law Union Insurance and ETI lost 9.09% and 8.50% respectively to close at N0.40 and N9.15, on market forces and the prevailing downtrend.

Market Outlook
We expect the recovery was driven by MTN to a slowdown in the midst of profit taking and value investors take advantage of the low valuation to rebalance their portfolio ahead of Q2 numbers, given plans by the CBN to reduce banks’ participation in government securities, while boosting private sector lending to drive economic activities and investment.
More importantly, we expect that the government would sign the federal budget without further delay while we expect a change in its disbursement and implementation style in 2019 budget and beyond to make an impact and drive the economy.
Investors look to government’s policy direction as the market faced low liquidity problems in the ongoing Q1 earnings reporting season, vis-à-vis market and economic fundamentals.
The drop in prices of major blue chips in recent times has created entry opportunities, following which we expect speculative trading to shape the market direction going forward.
The ongoing volatility will continue as investors and fund managers rebalance their portfolios, with eyes fixed on political space and ongoing quarterly earnings position and post-election market dynamics. Investors should review their positions in line with their investment goals, the strength of the company numbers and act as events unfold in the global and domestic environment.
However, we would like to reiterate our advice that investors should go for equities with intrinsic value.
We advise investors to allow numbers to guide their decisions while repositioning in any stock, especially now that stock prices remain low in the midst of mixed company numbers, weak economic and market fundamentals.

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Ambrose Omordion
CRO|Investdata Consulting Ltd
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